Oracle President Sees Less as More

Charles Phillips came to Oracle(ORCL Quote) from Morgan Stanley three years ago and has quickly become one of the three most powerful executives in the company.

As president, a title he shares with CFO Safra Catz, Phillips heads Oracle's sales, marketing and consulting organizations and is responsible for corporate strategy. His profile at the company rose as Oracle undertook an $18 billion acquisition binge that included software powerhouses PeopleSoft, Siebel Systems, JD Edwards and more.

In an interview last week in his 11th-floor Redwood City, Calif., office, Phillips talked about the company's acquisition strategy (think smaller) and his plans to go head-to-head with rival SAP(SAP Quote) by developing vertical expertise in key industries.

The Street.com: Your stock had a bit of a run-up just prior to earnings but is still trading below the levels of early 2004 while the Nasdaq as a whole has done much better. If you were still on Wall Street, what rating would you have on this stock? Be honest.

Charles Phillips: Most logical people would conclude that if we're making $2 billion more in pretax profit than we were two years ago, revenue is up, we have a better brand name and more customers and the stock hasn't moved, it's an opportunity. There's not much we can do about the stock price. But we can do something about the profit growth and the revenue growth and those have been there. That's what we're focused on. If the last 1,000 years of markets are correct, the expectation is that sooner or later the stock will respond.

Oracle is a significantly different company than it was a few years ago, why aren't the markets responding more favorably?

You said the magic words -- significantly different. My conclusion, after talking to hundreds and hundreds of investors, is that we did change our strategy and change is viewed as a potential risk on Wall Street.

Oracle's acquisition strategy seems to be moving into a new phase, buying smaller companies, with emphasis on open source, instead of megabuys like PeopleSoft. How do the latest acquisitions fit into Oracle's growth plans? Is this indeed a shift, or is it merely a new phase of the same strategy?

Same strategy, different phase. We are in phase two. Phase one was about getting scale ... which allows you to charge less but still be more profitable. We had to get scale first and we did it with PeopleSoft. Phase two is about going forward and adding industry dimensions that no one is dominant in.

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